Greece to Go to IMF if EU Refuses Aid: Report

CNBC.com

Wednesday, 10 Mar 2010 | 7:31 AM ETCNBC.com

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Greece is likely to formally ask the European Union for financial aid if the cost of borrowing does not fall in coming weeks and, if it doesn't get it, may go to the International Monetary Fund, Greek government officials told Dow Jones Newswires.

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Greek officials said over the past week that they were considering asking the International Monetary Fund for help, a position which analysts said would be highly embarrassing for the euro zone.

Some analysts said Greece's stance regarding the IMF was a way of forcing the EU's hand to come up with an aid package. The Balkan country has not yet officially requested any aid from the EU.

The premium charged currently by investors for Greek bonds is "simply unsustainable," and must come down in the next six to eight weeks, Dow Jones quoted an unnamed Greek official as saying.

"For the spreads to narrow, we need some kind of guarantee for our bonds from our European partners," the official told Dow Jones.

"If they don't give it to us and the spreads continue to be so wide, we will likely publicly ask for economic assistance and if there is no response, there will be no other choice but to turn to the IMF," the official added, citing having European state-backed banks buying Greek debt as a form of support.

Investors demand a premium of around 300 basis points above German bunds for Greek bonds, lower than more than 380 in January but much higher than a little more than 100 basis points they were asking last year before Greece admitted altering its public accounts to show a smaller budget deficit.

Greece needs the spread to tighten to around 200 basis points, the officials told Dow Jones.